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Personal representatives in probate have authority to enter into settlement agreements to resolve issues. The statute requires the signatures of all interested parties before a probate court approves a settlement.
Must all beneficiaries of an estate approve of an agreement? Or just those making the agreement? In the case of In re Estate of Riley, 295 P.3d 428 (2013), the Arizona Supreme Court considered this question.
The Dispute Between the Personal Representative and Two Beneficiaries
M. Riley died in 1996, leaving her estate to her thirteen children. The Last Will & Testament appointed the eldest two children, J. Riley and T. Benge, as co-personal representatives. The estate was divided into 13 shares. In 2006, J. Riley and T. Benge filed a petition to distribute and close the estate.
The petition included an accounting. One of the beneficiaries objected to the accounting. He charged that J. Riley and T. Benge breached their fiduciary duties. He asked the court to appoint a successor personal representative. The probate court appointed Mr. Barkley as such. J. Riley and T. Benge filed another accounting. After reviewing it, Barkley found inaccuracies.
The Settlement of the Dispute in Probate Court
Barkley settled the estate’s claims against J. Riley and T. Benge. The settlement agreement required J. Riley to pay $15,000 and disclaim his interest in the estate. T. Benge was to pay $50,000 but retain her interest in the estate. In exchange, the estate agreed to release all claims against J. Riley and T. Benge.
The compromise required approval by the probate judge and was to bind all of the beneficiaries. Nine of the thirteen children objected to the settlement. Nonetheless, the probate court approved the agreement as a settlement of a good faith dispute. The other children appealed.
The court of appeals found the agreement was void since it was not executed by all the beneficiaries. The Supreme Court granted Barkley’s petition for review because the case presented an important issue of first impression in Arizona.
Securing Probate Court Approval of the Settlement Agreement
Arizona law sets forth a procedure for securing court approval of a compromise of disputed interests in the estate. It required that the compromise be executed by all persons having interests or claims which may be affected by the compromise.
If the court formally approves the compromise, it is binding on all the parties. The parties, in this case, disagree as to who must sign. They disagree as to whether only T. Benge and J. Riley or all beneficiaries must execute the agreement.
Barkley contends that only T. Benge and J. Riley must sign. He argues that the law distinguishes between disputes over estate administration and disputes over estate distribution. He says that only the latter (disputes over distribution) require all beneficiaries to agree. He claims that this agreement resolves an administrative dispute which does not require all beneficiaries’ signatures.
However, the Supreme Court found that the agreement altered the distribution scheme of the estate. It required a division of the estate among 12 beneficiaries instead of 13. The agreement thus affected the “beneficial interests” of the remaining twelve beneficiaries. Therefore, all of the beneficiaries had to execute the agreement before the court could approve it.
Only Barkley, J. Riley, and T. Benge signed the agreement. Therefore, the probate court’s approval did not bind those who did not sign it. The Court noted other compromise procedures available to a personal representative that did not include probate court approval. These would not, however, insulate a personal representative from future litigation.
Arizona Supreme Court’s Decides the Settlement Agreement Must be Agreed Upon by All Beneficiaries
The Arizona Supreme Court reversed the ruling of the lower court and remanded the case back to the probate court.
If you have questions about probate court estate settlement in an Arizona divorce case, you should seriously consider contacting the attorneys at Hildebrand Law, PC. Our Arizona community property and family law attorneys have over 100 years of combined experience successfully representing clients in community property disputes and family law cases.
Our family law firm has earned numerous awards such as US News and World Reports Best Arizona Family Law Firm, US News and World Report Best Divorce Attorneys, “Best of the Valley” by Arizona Foothills readers, and “Best Arizona Divorce Law Firms” by North Scottsdale Magazine.
Call us today at (480)305-8300 or reach out to us through our appointment scheduling form to schedule your personalized consultation and turn your Arizona community property or family law case around today.
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About the Author: Chris Hildebrand has over 26 years of Arizona family law experience and received awards from US News and World Report, Phoenix Magazine, Arizona Foothills Magazine and others. Visit https://www.hildebrandlaw.com.